Case Law Details
Genius Ortho Industries Vs Union of India And 2 Others (Allahabad High Court)
GST registration cannot be cancelled mechanically without taking into consideration the points in reply, statements and evidence recorded during verification: Allahabad HC
The Hon’ble Allahabad High Court in the case of Genius Ortho Industries v. Union of India [Writ Tax No. – 542 of 2023 dated April 24, 2025] held that GST registration cannot be cancelled mechanically without taking into consideration the points in reply and the statements and evidence recorded during verification. Thereby, the order for GST registration cancellation was set aside.
Facts:
M/s. Genius Ortho Industries (“the Petitioner”) has filed a writ petition against the order dated February 27, 2023 (“the Impugned Order”), passed by the Joint Commissioner (Appeals) (“the Appellate Authority”). The matter was remanded back before the said bench of the Hon’ble High Court, after the writ petition filed was dismissed, and the appeal against the dismissal order was allowed by the Hon’ble High Court Division Bench with direction that said matter be decided on merits.
It is stated that the Petitioner’s business premises was surveyed based on which, a show cause notices (“SCN”) were issued for cancellation of Petitioner GST registration on the ground that discrepancy was noticed in physical verification and thereafter, though reply filed, was not considered satisfactory, the GST registration of the Petitioner was cancelled vide Order-in-Original dated December 19, 2022 (“the Impugned Order”) on the ground that no reply was submitted for non-availability of any input, finished goods or worker in the registered premises. Against the said Impugned Order passed, an appeal was filed, which was also dismissed vide order dated February 27, 2023 (“the Impugned Appellate Order”) by the Appellate Authority (Collectively referred as “the Impugned Orders”).
The Petitioner submitted that they were never put to any notice about the material found against the Petitioner during the survey of the business premises based on which the registration of the Petitioner has been cancelled and therefore, the Impugned Order has been passed in violation of principles of natural justice and the said points have also not been considered by the Appellate Authority.
Issues:
Whether GST registration can be cancelled mechanically without taking into consideration the points in reply and the statements and evidence recorded during verification?
Held:
The Hon’ble Allahabad High Court in Writ Tax No. 542 of 2023 held as under:
- Noted that, as per SCN issued for cancellation of GST registration only one sentence discrepancy was recorded based on the physical verification. Based on which the Impugned Order for registration cancellation citing the reason “non-availability of any input, finished goods or worker in the registered premises”.
- Further noted that, in the counter affidavit filed, it has clearly been mentioned that on being enquired during the physical verification of the premises, the watchman told “Kabhi Kabhar Chalti Hai”, which shows that the activities of business were being undertaken by the Petitioner.
- Further noted that, the no notice was ever put to the Petitioner, rather in the counter affidavit, a statement has been made that as per Rule 25 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) reports are available on GST Portal in Form GST REG-30. However, in the SCN issued, there is no mention of the said report, and, the action has been taken against the Petitioner, based on the observation in report issued in Form GST REG-30. Thereby, the Impugned Order is liable to be set aside on this ground.
- Opined that, the Impugned Order has been passed without giving any due weightage to the specific statement made by the watchman and no contrary material has been brought on record, the Impugned Order cannot be sustained in the eyes of law.
- Held that, the writ petition is allowed, and the matter is remanded back to the authority for reconsideration and passing of reasoned and speaking order, taking into consideration the submission made by the Petitioner.
Relevant Provision:
Rule 25 of the CGST Rules:
Rule 25. Physical verification of business premises in certain cases. –
(1) Where the proper officer is satisfied that the physical verification of the place of business of a person is required after the grant of registration, he may get such verification of the place of business done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days following the date of such verification.
(2) Where the physical verification of the place of business of a person is required before the grant of registration in the circumstances specified in the proviso to sub-rule (1) of rule 9, the proper officer shall get such verification of the place of business done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal at least five working days prior to the completion of the time period specified in the said proviso.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Hears Ms. Tanisha Jahangir Monir, learned counsel for the petitioner and Sri Amit Mahajan, learned counsel for the respondent nos. 2 & 3 and Sri Sudarshan Singh, learned counsel for the respondent no.1.
2. By means of instant writ petition, the petitioner has assailed the order dated 27.02.2023 passed by Joint Commissioner (Appeal) (GST Appeal) Meerut, in Appeal No.36-CGST/APL-MRT/GZB/2022-23/600 as well as order dated 19.12.2022 passed by respondent no.3 in Reference No.ZA091222137398F.
3. This Court vide its order dated 29.02.2024 dismissed the present writ petition against which Special Appeal No.647 of 2024 was filed before the Division Bench of this Court and the same was allowed vide order dated 08.08.2024 and the matter was remanded for deciding on merits.
4. Learned counsel for the petitioner submits that the petitioner, which is duly registered under the GST Act, is engaged in the business of surgical goods etc. She further submits that the business premises of the petitioner was surveyed on the basis of which, a show cause notices were issued for cancellation of registration of the petitioner on the ground of discrepancy noticed in physical verification and thereafter, the reply was submitted, but not being satisfied from the reply, the registration of the petitioner was cancelled on 19.12.2022 on the ground that no reply was submitted for non-availability of any input, finished goods or worker in the registered premises. Against the said order, an appeal was filed, which has also been dismissed by the impugned order.
5. She further submits that the petitioner was never put to any notice about the material found against the petitioner during the said survey of the business premises whereby the registration of the petitioner has been cancelled and therefore, the orders impugned were passed in gross violation of principle of natural justice, as well as the appellate authority also failed to consider the same.
6. Rebutting to the said submission, Sri Mahajan, learned counsel for the respondents supports the impugned orders by submitting that the petitioner had due knowledge about the discrepancy found at the time of physical verification and it is incorrect on the part of the petitioner to submits that they were never put to any notice, rather the notice was issued and reply thereto was submitted and wherein, no reason has been assigned for the discrepancy found at the time of survey and therefore, the order has rightly been passed.
7. In support of his submission, he has placed reliance upon Division Bench Judgment of this Court passed in the case of Star Cranes 400/7 Beind Azad Vs. Union of India and Another (Writ Tax No. 1512 of 2024) and submits that no writ is required to be issued against the order of cancellation in favor of the petitioner.
8. Rebutting to the said submission, Ms. T.J. Monir has placed reliance upon the judgments of Delhi High Court passed in the cases of M/S. Balaji Enterprises Vs. Principal Additional Director General Directorate General of GST Intelligence and ors. !P. (C) 10315/2022] and Vijay Sales Enterprises Vs. Superintendent Range-25, GST Division, New Delhi !W.P.(C) 13596/2023 & CM Appl.53641/2023] and submits that once there is no allegation for obtaining the registration by means of fraud, wilful misstatement, the registration cannot be cancelled.
9. She further submits that the petitioner was never put to notice for the material found against the petitioner before cancellation of registration on the ground mentioned in the impugned orders. She prays for allowing the present writ petition.
9. After hearing the parties, the Court has perused the record.
10. It is not in dispute that the notice was issued on 13.12.2022 for cancellation of registration with one sentence discrepancies noticed while physical verification, a copy of which has been annexed as Annexure No.1 to which a reply was submitted. The cancellation order passed on 19.12.2022. The relevant part of the said order is read as under:-
“1. No reply submitted to non-availability of any input, finished goods or worker in the registered premises. Hence, registration cancelled as per physical verification as no activity was found there”
12. In the counter affidavit, at page no.19, it has clearly been mentioned that on being enquired during the physical verification of the premises, the watchman told “Kabhi Kabhar Chalti Hai‘, which shows that the activities of business were being undertaken by the petitioner but without giving due weightage to the specific statement made by the watchman, the impugned order has been passed. Once the fact was recorded as to whether the business activities were being undertaken, no contrary material has been brought on record, the impugned orders cannot be sustained in the eyes of law.
13. Further, the record shows that the material used against the petitioner for cancellation of registration, no notice was ever put to the petitioner, rather in the counter affidavit, a statement has been made that as per Rule 25, reports are available on GST Portal in Form GST REG-30. But in the show cause notice, no mention has been made and thus, as per form- GST REG-30 the action is taken against the petitioner. Therefore, on this ground also, impugned order cannot be sustained.
14. Accordingly, the impugned orders are hereby quashed.
15. In view of the above facts as stated, the matter requires re-consideration.
16. In the result, the writ petition is allowed. The matter is remanded to the authority concerned for deciding afresh by passing a reasoned and speaking order, after hearing all the stakeholder as well as giving the due opportunity and liberty to the petitioner herein to adduce and produce relevant evidence and material in his favour, within a period of three months from the date of production of certified copy of this order.
17. Any amount deposited by the petitioner pursuant to the impugned orders, shall be subject to the outcome of the fresh order to be passed by the authority concerned.
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